Amazon.com Inc. (NASDAQ: AMZN) is reportedly preparing to launch its own delivery service, which directly competes against United Parcel Service Inc. (NYSE: UPS) and FedEx Corp. (NYSE: FDX), according to The Wall Street Journal.
Shares of UPS fell by 2.7 percent and shares of FedEx fell by 2.5 percent.
The delivery service will be named “Shipping with Amazon” or SWA. The service will allow Amazon to directly pick up packages from business, ship and deliver to consumers, the WSJ said, citing sources familiar with the matter.
Amazon currently uses UPS and FedEx to deliver its packages. Sources told WSJ that Amazon is planning to undercut the two delivery carriers, although the rate structure is still unclear.
The sources said that Amazon expects to launch the new service in Los Angeles in the coming weeks with third-party vendors that use the site to sell products. The service will expand to more cities within the year.
“We’re always innovating and experimenting on behalf of customers and the businesses that sell and grow on Amazon to create faster lower-cost delivery choices,” a spokeswoman said in a statement.
While the service is partnered with Amazon’s third-party sellers, it is possible for the service to expand to other businesses.
"The headline in today's Wall Street Journal demonstrates a lack of basic understanding of the full scale of the global transportation industry," said FedEx spokesman Patrick Fitzgerald.
Amazon has already tackled other options for delivery methods for its consumers. The company has already expanded into ocean freight, cargo planes and delivering packages inside homes.
But the problem with the delivery service for Amazon is the expenses. Analysts have estimated that Amazon would have to invest up to $100 billion to compete with UPS and FedEx, according to Business Insider.
Analysts project that Amazon’s delivery service would not be ready to compete head-to-head against other delivery services who’ve already invested so heavily into their services. If the service is to launch, it is expected for it to remain with Amazon partnered sellers for a while.